How to Track Expenses for PPP Loan Forgiveness

UPDATE: The PPP loan application period ended May 31, 2021. Learn about financing options available for small businesses today at Lendio.com

If you applied for and received a Paycheck Protection Program (PPP) loan, you’re likely very aware of the uses, expectations, and tracking requirements needed to achieve loan forgiveness. If you’re not, we’ll give you a refresher here, along with another basic guide for how best to track the movement of every single one of your PPP dollars. 

Where You Can Spend Your PPP Loan Dollars

The Paycheck Protection Program (PPP) loan forgiveness specifications are pretty strict when it comes to funds usage. There are 2 core categories of which you need to be aware: “payroll” and “other business expenses.” To get the forgiveness we all hope you will, it’s vital that you keep to these approved uses and within the amounts stipulated by the SBA (more on that in a bit).

Payroll

Contrary to what some people might expect, “payroll” doesn’t just include the paychecks passed out to employees. When it comes to the PPP loan category, quite a few other business costs also fall under the payroll umbrella. In addition to employee compensation, these include:

• Paid vacation, maternity/paternity, family, medical, and sick leave
• Allowances for dismissal or separation
• State or local taxes assessed on employee compensation
• Healthcare benefits (including premiums for insurance)
• Retirement benefits

Other Business Expenses

This category may seem like the catch-all bag, but it’s not. The forgiveness requirements are quite specific on the qualifications and general parameters surrounding the term “other.” Fortunately, we’ve got the list right here:

• Rent and utilities (for business locations) 
• Interest on mortgage obligations (excluding prepayment or payment of principal on a mortgage)
• Interest on any other debt obligations that were incurred before February 15, 2020

Details You Don’t Want to Miss

Not only do you have to worry about how you use your PPP loan funds, but you also need to take special care of how much you use between those 2 categories. According to the forgiveness details section of SBA’s Paycheck Protection Program page, you must use no less than 75% of the loan amount to cover the payroll costs listed above. Additionally, they state that forgiveness is based on whether or not you maintain or quickly rehire employees at their original salary, but “forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.”

All of that means you desperately need to stay on top of your books, track your spending, and have a paper trail for every penny received and spent. Fortunately, we’ve got a pretty great tool that can take your bookkeeping to the next level.